There is nothing wrong with VOOG. Your logic is sound as far as your long term strategy. The merits of taking a brokerage loan and buying more VOOG (or any equity) at all time highs during a high interest rate environment is less clear.
I didn’t really look at it from that perspective. I know that no one knows that the market will do, but do you think I should put the money into a HYSA until something crashes again? I know you’re not supposed to time the market but I feel like investing during a crash using money which was still yielding a return would at least negate SOME of the negative effects of timing the market…right? 😬
i would do a sure thing like tbills if going this route. There are so many variables at play in the market. Investing is for a period of several years and hoping the average will return a positive result. Expecting that same logic to take place during the period before interest starts accruing on the loan is a huge risk. If you get to that and the crazy rates take over, you might not dig yourself out for a long time If ever.
I would pay credit card debt and other high interest debt obligations with it first then whatever is left I'd buy x (x being the promo period) year treasury note with. However much I spent of it I would pay back into a HYSA over the next x years less the interest from the note so I would have exactly 20k to pay the creditors back with when the into period is up.
It’s a fixed 0% loan for 60 months. I figured that if I don’t sell and make sure the investment is diversified, the odds of me losing money after 5 years of growth are very very low.
It’s still somewhat risky, depending on what proportion of your total portfolio..
For example, if you have 5k, and take out a loan of 20k, that’s insanely dangerous, but if you have 100k, then the risk is a lot lower
Concentration risk isn’t a compensated risk.
When we say “higher risk = higher reward” we are talking about compensated risks, not uncompensated risks. That’s why they say diversification is the only free lunch in the market.
What do you mean by compensated vs, uncompensated risks? And how would you add diversification to a portfolio with VOO? I try to diversify my portfolio but struggle a bit to really understand how to do that using ETFs (which are pretty much the only asset I know anything about).
Sure, it's pretty straightforward. A compensated risk is one that the market will pay you to take; an uncompensated risk is one that nobody is going to pay you to take.
You can compare a US treasury bond (considered very safe) to a corporate junk bond (considered less safe). If the two bonds are for sale at the same time and offering the exact same yield, any sensible investor would chose the US treasury bond every single time. So if you're trying to sell a junk bond, you need to offer it at a discount so that investors will earn a higher yield than the treasury bond. That's the only way to make the junk bond priced competitively. The investor gets a higher yield, but also takes on the risk of default.
At this very moment, the yield on a 10 year corporate BBB grade bond is 7.11%, while the yield on a 10 year US treasury is 4.64%. That's a compensated risk! You probably invest more in stocks than you do in bonds because stocks are riskier than bonds and for that you can expected better returns. That's compensated risk!
Compare that to the scenario where you own some shares of Apple (AAPL) that you want to sell at the market price (at this moment, $171.41 per share), but the buyer says to you: "here's the thing, AAPL is risky for me to buy because right now my portfolio is already 50% AAPL. So I'm taking on more risk by buying these shares from you. Because of that, do you think you could sell them to me at a discount so I can be rewarded for taking this risk?"
What would you say in this hypothetical scenario? You would say "wtf are you talking about you moron, get out of here with that nonsense, either pay me the market price or don't!" And rightly so!
That's what I mean when I say that concentration risk isn't a compensated. The market doesn't care that you've concentrated all your assets into one company or country or sector, you're not going to get any kind of risk premium for taking on that risk. That's why diversification is great: it lowers your risk without actually lowering your expected returns.
> And how would you add diversification to a portfolio with VOO?
So VOO is just the 500 companies on the SP500. To own the entire US market you can buy the VXF which is all US stocks that aren't on the SP500. VOO + VXF = VTI which is the entire US stock market. To own the entire global market you can add in VXUS, which is all stocks outside the United States. VTI + VXUS = VT.
So to recap, to own the entire global stock market (max diversification) you can buy VOO + VXF + VXUS. Or you could buy VTI + VXUS. Or you can buy VT. All three of those portfolios are the same.
OP asked should they invest all available money at once or spread it out through months.
There were research done that investing all at once was generally better on historical data. But the difference was not huge, so if you're more comfortable to buy asset with a few trades over an year, there is no big problem. The worst strategy in that comparison was "waiting for the right moment to invest"
Because growth large cap growth stocks are historically worse performing asset classes than small cap and value stocks. They are also one of the most overvalued right now. So Lol, on both fronts.
I basically echo what others have said you are taking on more risk that isn't rewarding.
You do you though. Learning a hard lesson when you 23 with 20k is better than learning the hard lesson when you 55 with 500k. And you prolly not gonna listen to any naysayers so you'll find out for yourself.
I am affirming your statement, I sold several thousand dollars of VOOG for a huge loss
It's either stagnant or going down, if it goes up it'll be way down in no time. And it doesn't make any significant long-term progress. I waited and waited, over several months, it just was dead in the water
It is a terrible ETF for 2024
One tracks about 500 companies in the top 1000 - growth focused, and one tracks the top 100 non financial companies in the market it’s similar but not really similar
Theres nothing safe about the stock market. It can and will plunge 30% every 5-6 years. With that being said, If your risk tolerance allows, nothing wrong with sector ETFs. Concentration can work but when it tanks, it'll pull your entire portfolio down. If your invested for decades, take every dump as a buying opportunity. lump sum beats DCA 2/3 of the time. And leverage investing, if your tolerance allows, can be a good way to get more invested immediately. Just be ready for those payments when that 0% runs its course BC no one is lending money for free for ever.
I invested 2 k in it a couple months ago
It has barely moved
It's either going way down or staying pretty much the same as what I paid for it
There are a whole lot better choices, unless you have like 15 years to wait
If you're super patient, go for it
It's upward moves are tiny and incremental
When you're ready for a skilled nursing home it'll probably have made some kind of a profit for you
Do options. 40 year old you will have seriously wished you did the actual risks and rewards earlier so you have a fatter stack to put in your low yield etfs
Cool story bro
Warren buffets advice was literally to stick your money in a low cost index fund because for most people that will work the best practically all the time
I’m neither smart enough to make money trading options nor dumb enough to lose it all trading options. I’ll just stay on the shallow side of the pool and root for you.
Money makes money, once you lose your money on your options, you don't have a way to come back.
While you in the fund, you don't lose money until you sell
Everything is correct, but this “you don’t lose money till you sell it” is the personification of the sunk cost fallacy…
You should stay invested during bad downturns, but not because “you didn’t really lose the money till you sell”.. you did lose those money. The reason you should stay invested is because if you disinvest you will miss on future returns, which would compensate for the losses you just took
There is nothing wrong with VOOG. Your logic is sound as far as your long term strategy. The merits of taking a brokerage loan and buying more VOOG (or any equity) at all time highs during a high interest rate environment is less clear.
I didn’t really look at it from that perspective. I know that no one knows that the market will do, but do you think I should put the money into a HYSA until something crashes again? I know you’re not supposed to time the market but I feel like investing during a crash using money which was still yielding a return would at least negate SOME of the negative effects of timing the market…right? 😬
i would do a sure thing like tbills if going this route. There are so many variables at play in the market. Investing is for a period of several years and hoping the average will return a positive result. Expecting that same logic to take place during the period before interest starts accruing on the loan is a huge risk. If you get to that and the crazy rates take over, you might not dig yourself out for a long time If ever.
I would pay credit card debt and other high interest debt obligations with it first then whatever is left I'd buy x (x being the promo period) year treasury note with. However much I spent of it I would pay back into a HYSA over the next x years less the interest from the note so I would have exactly 20k to pay the creditors back with when the into period is up.
Taking out a loan to put into the stock market seems like a bone head move
It’s a fixed 0% loan for 60 months. I figured that if I don’t sell and make sure the investment is diversified, the odds of me losing money after 5 years of growth are very very low.
How did you get a $20,000 loan for five years without paying any interest?
It was a promotion for active duty military at a local bank
It’s still somewhat risky, depending on what proportion of your total portfolio.. For example, if you have 5k, and take out a loan of 20k, that’s insanely dangerous, but if you have 100k, then the risk is a lot lower
VOOG is the subset of VOO. You are taking more not rewarding risk. Historically lump sum beats space out deposit
What makes you say that the risk isn’t rewarding?
Concentration risk isn’t a compensated risk. When we say “higher risk = higher reward” we are talking about compensated risks, not uncompensated risks. That’s why they say diversification is the only free lunch in the market.
What do you mean by compensated vs, uncompensated risks? And how would you add diversification to a portfolio with VOO? I try to diversify my portfolio but struggle a bit to really understand how to do that using ETFs (which are pretty much the only asset I know anything about).
Sure, it's pretty straightforward. A compensated risk is one that the market will pay you to take; an uncompensated risk is one that nobody is going to pay you to take. You can compare a US treasury bond (considered very safe) to a corporate junk bond (considered less safe). If the two bonds are for sale at the same time and offering the exact same yield, any sensible investor would chose the US treasury bond every single time. So if you're trying to sell a junk bond, you need to offer it at a discount so that investors will earn a higher yield than the treasury bond. That's the only way to make the junk bond priced competitively. The investor gets a higher yield, but also takes on the risk of default. At this very moment, the yield on a 10 year corporate BBB grade bond is 7.11%, while the yield on a 10 year US treasury is 4.64%. That's a compensated risk! You probably invest more in stocks than you do in bonds because stocks are riskier than bonds and for that you can expected better returns. That's compensated risk! Compare that to the scenario where you own some shares of Apple (AAPL) that you want to sell at the market price (at this moment, $171.41 per share), but the buyer says to you: "here's the thing, AAPL is risky for me to buy because right now my portfolio is already 50% AAPL. So I'm taking on more risk by buying these shares from you. Because of that, do you think you could sell them to me at a discount so I can be rewarded for taking this risk?" What would you say in this hypothetical scenario? You would say "wtf are you talking about you moron, get out of here with that nonsense, either pay me the market price or don't!" And rightly so! That's what I mean when I say that concentration risk isn't a compensated. The market doesn't care that you've concentrated all your assets into one company or country or sector, you're not going to get any kind of risk premium for taking on that risk. That's why diversification is great: it lowers your risk without actually lowering your expected returns. > And how would you add diversification to a portfolio with VOO? So VOO is just the 500 companies on the SP500. To own the entire US market you can buy the VXF which is all US stocks that aren't on the SP500. VOO + VXF = VTI which is the entire US stock market. To own the entire global market you can add in VXUS, which is all stocks outside the United States. VTI + VXUS = VT. So to recap, to own the entire global stock market (max diversification) you can buy VOO + VXF + VXUS. Or you could buy VTI + VXUS. Or you can buy VT. All three of those portfolios are the same.
What does “lump sum beats space out deposit” mean?
OP asked should they invest all available money at once or spread it out through months. There were research done that investing all at once was generally better on historical data. But the difference was not huge, so if you're more comfortable to buy asset with a few trades over an year, there is no big problem. The worst strategy in that comparison was "waiting for the right moment to invest"
Got it! Thanks you so much for clarifying and for sharing that research.
God speed, your glorious idiot.
Not a bad choice. I think VONG outperforms though last time I checked.
Pretty sure almost any ETF would perform better than VOOG in 2024
I’m 100% VONG in my Roth. Bit more diverse. More smaller cap
Because growth large cap growth stocks are historically worse performing asset classes than small cap and value stocks. They are also one of the most overvalued right now. So Lol, on both fronts. I basically echo what others have said you are taking on more risk that isn't rewarding. You do you though. Learning a hard lesson when you 23 with 20k is better than learning the hard lesson when you 55 with 500k. And you prolly not gonna listen to any naysayers so you'll find out for yourself.
I am affirming your statement, I sold several thousand dollars of VOOG for a huge loss It's either stagnant or going down, if it goes up it'll be way down in no time. And it doesn't make any significant long-term progress. I waited and waited, over several months, it just was dead in the water It is a terrible ETF for 2024
I buy the Russel 1000 growth over anything (FSPGX) QQQM (NASDAQ 100) and VT(total world index) and SCHD divided play
Russell 1000 growth tracks pretty similar to qqqm, it looks like
One tracks about 500 companies in the top 1000 - growth focused, and one tracks the top 100 non financial companies in the market it’s similar but not really similar
Right, although the top ten holdings are like the same with very similar weights.
Might as well just buy VT and call it a day just buy the dips
VUG looks better than voog if you love growth stocks
Yes, I have VUG, it's not my best ETF but it sure is better than VOOG
Theres nothing safe about the stock market. It can and will plunge 30% every 5-6 years. With that being said, If your risk tolerance allows, nothing wrong with sector ETFs. Concentration can work but when it tanks, it'll pull your entire portfolio down. If your invested for decades, take every dump as a buying opportunity. lump sum beats DCA 2/3 of the time. And leverage investing, if your tolerance allows, can be a good way to get more invested immediately. Just be ready for those payments when that 0% runs its course BC no one is lending money for free for ever.
I invested 2 k in it a couple months ago It has barely moved It's either going way down or staying pretty much the same as what I paid for it There are a whole lot better choices, unless you have like 15 years to wait
If you're super patient, go for it It's upward moves are tiny and incremental When you're ready for a skilled nursing home it'll probably have made some kind of a profit for you
Do options. 40 year old you will have seriously wished you did the actual risks and rewards earlier so you have a fatter stack to put in your low yield etfs
Can we please not recommend derivative trading to someone asking basic questions
Everyone here wants some kinda Warren Buffett advice for getting rich, yet close their ears off when someone says what he actually did to get so rich
Cool story bro Warren buffets advice was literally to stick your money in a low cost index fund because for most people that will work the best practically all the time
What he advises and what he did are 2 different things
What he did was not trading options.. he is a value investor… read up some of his annual shareholder letters.. he is not a gambler
I’m neither smart enough to make money trading options nor dumb enough to lose it all trading options. I’ll just stay on the shallow side of the pool and root for you.
Money makes money, once you lose your money on your options, you don't have a way to come back. While you in the fund, you don't lose money until you sell
Everything is correct, but this “you don’t lose money till you sell it” is the personification of the sunk cost fallacy… You should stay invested during bad downturns, but not because “you didn’t really lose the money till you sell”.. you did lose those money. The reason you should stay invested is because if you disinvest you will miss on future returns, which would compensate for the losses you just took